So much to do before the regulations kick in and it seems like there is never enough time. Remember that in your list of priorities there are high and immediate priorities, and priorities that can take a little time. The purpose of the checklist is to get everyone organized so that no one is confused and everyone remains on task. You can temporarily add your new pricing policy to your compliance checklist function of your pricing engine. This can easily be turned on and then removed as your staff acclimates. The key is to repeat the message until everyone is clear, and to document the answers should compliance or an examiner have a question.
_____ Will you do only QM? Or, will you allow non-QM as well?
_____ If you allow Non-QM what is the policy around that? Guidelines, protocol, pricing adjustments, etc. It is important to have this in writing and part of your training to keep everyone on task and to demonstrate your policy to an examiner.
_____ How will you display your rates/price to the LO? Hint: Have your pricing engine set the rate with risk adjustments built into the quote, versus the LO setting the rate and you will have fewer QM points and fees issues.
_____ How will you handle above Par and below Par pricing (and any fractionation) that is not large enough to equate to a rate increase or decrease? This must be consistent or you will have pricing disparity issues. For instance, let’s assume my secondary marketing methodology is 50bps in price for each 1/8th in rate. What will you do with 49-1bps under or over? If over, will it result in a credit to the borrower? If under, will it result in a charge to the buyer to get that rate? All of this needs vetted out so that your system is quoting per your company policy. Warning: Consistency is key! You will have to prove your methodology was applied equally and consistently to avoid Fair Lending issues.
_____ How will you demonstrate the consistency of your secondary marketing methodology?
_____ What system will you use to verify QM vs. Non-QM? Warning! Fair Lending analysis will require that you know all available options to the client, not just whether or not the one that you locked in does. This is going to take the power of your historical database versus the old way of using a rate sheet.
_____ How will you manage your fees to ensure correct APR calculations and APOR comparisons. Today’s regulatory environment requires consistency in fees to avoid Fair Lending issues as well. You can no longer be all over the board. Lock down your fees, note any adjustments as a concession and monitor this carefully. Remember that Fair Lending is about Rate, Price and Cost consistency. No deviation between similarly situated clients should occur without a cost concession notation.
_____ How will you trace your QM pricing? There are many calculations involved and sometimes the difference between a QM loan and non-QM loan is just a quick adjustment. You will not know that if you do not have a tracing mechanism for each file and each program. PS. Your pricing engine can easily do this for you.
_____ How will you disqualify based on toxic loan features per product? How will you simultaneously offer options that are not toxic? Again your pricing engine can do this for you.
_____ How will you display your LLPAs to the LO? Lock them down so they cannot be changed but show them for educational purposes? Not show them?
Chances are very good that much of this can be decided and implemented quickly by contacting your account manager. Save yourself a lot of stress and make that call!
